☕️ Good morning CryptoAMers. In about an hour I’ll be boarding a flight to my hometown of Washington DC to take part in the annual DC Blockchain Summit. If you’re in and around DC, give me a shout!
3 things you need to know:
One: ether Announces New Version of USDT on Tron
TRX ticked upwards on the news that the Tron Foundation will partner with Tether to launch USDT on the Tron network by the second quarter of 2019. The USDT stablecoin will be a TRC-20, the standard used on the Tron blockchain and comparable to the ERC-20 used on Ethereum.
Tron isn't the first, second or third blockchain to have Tether support. In fact it's the fourth, with Tether also available on the Bitcoin, Litecoin, and Ethereum blockchains. This is made possible because Tether was built predominantly on the Omni layer, which is on top of the Bitcoin blockchain and allows tokens to be minted and traded on multiple blockchains.
The benefit for both sides: Tether remains the dominant stablecoin on the market. Having this available on the Tron network has the potential to increase the number of institutional investors who use Tron's blockchain by giving them a stablecoin on the network in times of volatility.
It also allows Tron token holders to more easily convert into USD, adding utility to the network, which is incredibly useful for the gambling platforms that are now thriving on the Tron blockchain.
Thought bubble: I would like to point out that people have been sleeping on Tron, and the savvyness of it’s operators. In the “mainstream” crypto intellectual community (often found opining on twitter), you’ll often see immediate derision of protocols such as Tron and EOS. There are plenty of criticisms that can be leveled at both chains, but when you look into it you will find there are robust ecosystems surrounding these semi-decentralized applications.
Both Tron and EOS have widely used dApps running on their platforms due to their reasonably fast settlement times. The protocol wars are just beginning to heat up, and I would be watching very closely to see where the developers and users end up. The english speaking world tends to believe Ethereum is a frontrunner, but that isn’t true abroad. There have been plenty of times that humanity has chosen the “wrong” technology (Think, AC vs DC currents), and there’s no reason to believe it can’t happen again!
Two: Dash Cuts Staff as Crypto Winter Continues
In a continued sign that crypto projects are struggling Dash Core Group, the main firm behind Dash (yeah, there’s a firm behind a privacy coin. What’s that? Zcash has one too? Hmm) announced that it would be cutting 8% of its staff later this month. The move comes after months of spending reductions and a six month hiring freeze and follows similar layoffs by Steemit, SpankChain and Consensys in the latter half of 2018. Dash was at one stage a top five crypto and even today inexplicably remains a top 20 project.
As the crypto winter grinds on, it’s increasingly obvious that no firms accurately predicted the length and extent of the winter and few had contingency plans. There was rapid and unsustainable growth both in the markets and in the companies building around crypto, and it ended in bust as all booms do.
As a takeaway, it’s interesting to see that emotions ran businesses the way emotions ran the markets. It makes one wonder how the markets can be reasonably priced given the fact it’s clear many people in crypto tend to not apply a strong risk lens towards actions.
Given this lack of understanding, lack of fundamental values, and emotional approach that many have in this space, one of the more interesting things you can do is attempt to figure out the psychology of the players in the market and attempt to front run their moves by predicting the irrational moves of investors and companies in the market. In the markets section below, I suggest one common type of coin correlation that employs this method of investor prediction.
Three: Coinbase & Neutrino, an Unholy Partnership
This story has been explored extensively over the last week, so I will avoid flogging the already-too-dead horse too much, but I do believe there are some things of note that should be discussed.
For those who are are unclear on the details, two weeks ago it was made clear that Coinbase had acquired a company (Neutrino) that was dedicated to building blockchain analytics tools that enabled users of the software to track and identify cryptocurrency users, effectively de-anonymizing people in order to help with AML/KYC compliance and criminal issues.
As it turns out, the executive team of that company was comprised of a group of people who had founded a company previously called “The Hacking Team”, which has been accused (correctly) of selling high quality surveillance software to repressive regimes such as Sudan, Bahrain, Venezuela, and Saudi Arabia.
This caused an uproar within the cryptocurrency community, as it truly goes against the core values of cryptocurrency. #DeleteCoinbase began trending on cryptotwitter, and before you could blink there was a full blown PR disaster for Coinbase.
Yesterday, the CEO of Coinbase announced that this was a failure of due diligence and is formally severing ties with the members of Neutrino who were involved with Hacking Team activities. This includes the CEO, CTO, and Chief Research Officer.
Bitcoin was founded with an anti-establishment ethos emphasizing individual freedom and censorship resistance. Scandals like Neutrino remind us of these founding values and why they’re important: We’re supposed to be the guys fighting government surveillance and repression, not hiring people who actively promoted it. For Coinbase it was important to sever ties not only for their own brand reputation but, as one of the most prominent firms in the industry, to lay down a moral line in the sand and not compromise on these core cryptocurrency values.
Also in the news:
Market Outlook:
Quick Take
Direction: As expected, we revisited the 3700 level, but surprisingly had a strong bounce to break above the 3830 level this morning, and we are now trading around 3860 at time of writing. Based on the price action, I’d be expecting a slight retracement to the 3830 level before consolidation and further run. If we break below 3800, I’d expect another run to the 3700 level.
Key Support: 3830
Key Resistance: 3915
Overall Market: Binance Coin has continued it’s run, and at time of writing was trading up almost 20% over the day. Interestingly, this run seems to have extended to almost every exchange coin out there, with both Huobi and Bibox token trading up 10% as well. I’d expect this trend to continue and there I am moving some Bitcoin into promising exchange coins. This type of price action generally happens because people in crypto will see that BNB has moved tremendously and will want to the “the next” BNB, and will pour money into similar assets. During the 2017 bull run, there were significant correlations between coins that tackled similar issues due to this phenomenon.
Fear & Greed
Fear and Greed has dropped significantly over the last week, a good predictor of a continuing run.
Here’s a reminder of what these criteria mean
What I’m thinking today:
The Alpha Framework: An Analysis of the “Coinbase Effect”
After the Ripple announcement, there were a lot of analysis that came out suggesting the “Coinbase Effect” was no more. Many of these explorations did not dive deep enough into the weeds to accurately uncover whether there was in fact a decrease in the effect, so I put together both a framework to determine whether events have value and exploration into whether the Coinbase effect was indeed muted or not.
To summarize the findings:
The Coinbase effect has been weaker over the last 3 months — but the effect on Ripple was actually the best showing for the effect since October.
Market sentiment has a large impact, and the bearish market is likely the most to blame for diminished effects.
Market cap seemingly does not affect how much a coin reacts to being listed on Coinbase
The above points can be more easily visualized in the chart below.
The framework I’ve suggested for determining whether an event does indeed have alpha:
Excess Return: Make sure the asset is outperforming the market. Many people will point to the beginning of an event and say “Look, a coin is up 40%! What a trade!” They will then disregard the fact the market is up 50%. So the first thing to account for is market return during the period you wish to look at, and take a look at the excess return during that timeframe.
Market Cap Weighted: If a similar event moves a $1B coin 5% in January, and a $500M coin 10% in February, then we cannot say at all that the effect is diminishing. Some people may try to argue otherwise and to them I say go away, you are wrong. For an analysis to have weight, please make sure you instead account for discrepancies in return by market-cap.
Short term/long term: Does the announcement change the fundamentals of the asset? What are the 1d, 7d, and 30d returns post announcement? Your timeframe is important here to determine whether an event fundamentally changes the asset or is a market overreaction.
Volatility: If you’re feeling up for it, try to see how the announcement changes the volatility of the asset moving forward. This can give you insight into the long term effect. Will it provide more liquidity? Is it a safer investment now? Often times exchange listings dampen volatility of low caps, and do nothing to volatility of large caps.
The article isn’t half bad and isn’t a long read. Go give it a read!
...and some claps if you like it :)
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